Question

The Craft company had the following transactions and events during its first year of operations. Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000.

Required: Prepare the journal entries to record the following transactions for the year.

a. Purchased materials on account: $567,000

b. Requisitioned materials for production as follows: direct materials - 85% of purchase indirect materials - 12% of purchases

c. Direct labor for production is $331,000, indirect labor is $125,000

d. Overhead incurred (NOT including materials or labor): $529,000

e. Overhead is applied to production based on direct labor costs

f. Goods costing $976,000 were completed during the period

g. Goods costing $513,200 were sold on account for $776,000

h. The balance in the manufacturing overhead accounnt was closed out to cost of goods sold.

Answer 1

	overhead rate		770,000/350,000
			2.2
	overhead applied =		2.2*331000
			728200
No	Account titles & Explanations					Debit	Credit
a)	Raw materials inventory					567,000
	Accounts payable						567,000
b)	Work in process inventory					481950
	Manufacturing overhead					68040
	Raw materials inventory						549,990
c)	Work in process inventory					331,000
	Manufacturing overhead					125,000
	Factory wages payable						456,000
d)	Manufacturing overhead					529,000
	Accounts payable						529,000
e)	Work in process inventory					728200
	Manufacturing overhead						728200
f)	Finished goods inventory					976,000
	work in process inventory						976,000
g)	Accounts recievable					776,000
	Sales						776,000
	cost of goods sold					513,200
	Finished goods inventory						513,000
h)	manufacturing overhead					6,160
	Cost of goods sold						6,160